Article by
Barbados Today

Published on
October 29, 2016

A senior economist believes the establishment of a credit bureau here is long overdue.

In fact, Dr Justin Robinson last night stated that the failure of Minister of Finance Chris Sinckler to fulfill this promise which he made in his National Budget about two years ago had left Barbados looking “ancient [and] a little backward”, when compared to other global financial systems.

“One of the biggest challenges in terms of providing financing is having quality information,” argued Robinson, who was at the time delivering a lecture on Barbados’ Financial System since Independence: Access to Financing and Investment Opportunities”.

He pointed out that many countries around the world had either established credit bureaus or some other form of public credit registry to provide a comprehensive record of domestic financial transactions.

“So for example, if you go to a commercial bank for a loan now as an individual or a business, there is no formal database or registry where they can go and see how much you owe this credit union, whether you’re up-to-date on your revolving fund loan and those kinds of things,” he said.

Robinson, who is also a director of the Central Bank of Barbados, also acknowledged that there was some concern that such a bureau could negatively affect borrowing “as bankers find out that some of these entrepreneurs have loans all over the place that are not being serviced”.

However, he said such a move would be in keeping with global best practice, adding that “in terms of our financial system that is one of the areas we need to catch up on”.

Last night’s lecture was the latest in an ongoing series by the University of the West Indies in commemoration of this island’s 50th year of Independence.

As he dissected the island’s financial system, Robinson argued that though Barbados was said to be on par with middle income and high-income countries in providing access to financial institutions, it was “extremely close to the bottom of the class” in terms of efficiency of those operations.

“Today, 50 years after independence, we are actually doing quite well in terms the depth of the financial markets, where we actually exceed Latin America and low-income and middle-income countries,” the Dean of the Faculty of Social Sciences of the University of the West Indies Cave Hill Campus said.

“Where we have major challenges is in terms of efficiency, where Barbados is scoring below the Latin American and Caribbean average, as well as below the low, high and middle income countries,” he added.

The economist pointed to the underdevelopment of aspects of the financial architecture, the distribution of credit, the structure of the financial system itself, and ongoing challenges with equity financing and equity markets.

In terms of credit distribution, he said while the local financial system provides excellent access to personal credit and debt financing for relatively low-risk commercial projects, there remained a major gap in terms of the system’s capacity to finance riskier investments and in the provision of equity financing.

A key factor was the structure of the system itself which remains a “bank dominated” even though there has been a growth in non-banks since independence, he said.

“At independence, commercial banks would have accounted for about 82 per cent of the total assets in the financial system, and in 2016 commercial banks are still the dominant player.They account for 60 per cent,” he said, pointing out that insurance companies were next in line, accounting for 14 per cent of assets.

“The mutual funds are at nine per cent, credit unions, I think, are also at nine per cent, and the Trust and so on make up the rest,” Robinson acknowledged.

In terms of progress over the past 50 years, Robinson noted that the financial system had moved from being regulated as part of the Eastern Caribbean, to being regulated by an oversight committee comprising of the Central Bank, which regulates the banking sector, and the Financial Services Commission which regulates the non-banking sector.

A third regulatory body is the Deposit Insurance Corporation, which provides insurance for money deposited in commercial banks for up to a maximum of $25,000. As of 2015, he said 91 per cent of the assets in the banking system were guaranteed by this money.

Banks and credit unions and other financial entities do demand proof that their intended loan applicants can service their commitments. It’s on their application forms, and is further evidenced by requests signed commit form from a guarantor, and collaterals which may include Life insurance policies and title deeds. These are what we term countertop or tabletop demands or proofs, not forgetting employers’ letters. I quite agree with Dr. Robinson that, like keeping up with other financial lenders worldwide, we need to bring our systems up to date, especially as we are now 50 years on. But on closer examination, after the same 50 years. we still apply old time methods, which are, Bank connections through loans officers, family of or friends and friends of friends of authority at the lending agencies, Then there is the old stigma of not lending to the small black man who wants to get ahead but his connections barrel is empty. Pointed fact here Dr. Robinson, that right Here in Barbados, we have highly qualified and successful university graduates, earning lots of money but are long outstanding in their repayment of loans to the Students Revolving Fund, despite desperate calls and pleads. They can be seen about everywhere owning large expensive homes, driving expensive vehicles and dining at expensive restaurants, not forgetting frequent and first class travel.

Banks and credit unions and other financial entities do demand proof that their intended loan applicants can service their commitments. It’s on their application forms, and is further evidenced by requests signed commit form from a guarantor, and collaterals which may include Life insurance policies and title deeds. These are what we term countertop or tabletop demands or proofs, not forgetting employers’ letters. I quite agree with Dr. Robinson that, like keeping up with other financial lenders worldwide, we need to bring our systems up to date, especially as we are now 50 years on. But on closer examination, after the same 50 years. we still apply old time methods, which are, Bank connections through loans officers, family of or friends and friends of friends of authority at the lending agencies, Then there is the old stigma of not lending to the small black man who wants to get ahead but his connections barrel is empty. Pointed fact here Dr. Robinson, that right Here in Barbados, we have highly qualified and successful university graduates, earning lots of money but are long outstanding in their repayment of loans to the Students Revolving Fund, despite desperate calls and pleads. They can be seen about everywhere owning large expensive homes, driving expensive vehicles and dining at expensive restaurants, not forgetting frequent and first class travel.

I agree with Dr.Robinson, Barbados needs a credit reporting agency.
Half of Barbadians would be disqualified from obtaining loans from any reputable lending institutions.
Barbadians are dishonest when it comes to repaying loans.

I agree with Dr. Robinson, Barbados needs a credit reporting agency.
The majority of Barbadians are very dishonest when it comes to repaying loans. The entitlement mentality must be erased if Barbados is to survive going forward.
If you cannot meet the requirements to repay a loan, you will not get it from a reputable financial institution. That is the way it should be.
With a credit reporting agency in place, a market will open up for pay day loan companies. That is the way I see it.